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Sustaining Growth Through Digital Innovation

Kevin Gentle

Director and Lead Strategist, MADJOR

China’s manufacturing is moving elsewhere.

As income levels for unskilled labor rise beyond the affordable level, companies are outsourcing manufacturing to other APAC countries and importing the finished product into economies that will spend the money – China being one of them. Mass consumption is on the rise, a more brand-conscious demographic is fast taking the reins, and thus the importance of brand grows. The value of consumers’ loyalty has never been bigger.



But brands are subject to growing pains just like anyone else; with cost structures top of mind, certain brands may be tempted to ax digital investment, mistakenly seeing it as non-essential to their core competencies. This would be a huge mistake for it is precisely in these situations that digital innovation can be a brand’s saving grace.

Companies could afford to remain complacent when sales were steady and the economy was strong. There was sufficient purchasing power such that merely maintaining the status quo was enough to produce a hefty bottom line. But with the competition more fierce for consumers’ extra cash, brands that remain stagnant will be buried alive. It is only through increased innovation that a brand will survive, excel, and lead.

In this piece, we explore how brands should adjust and step up their digital efforts to come out ahead in the slowdown.

DOUBLE DOWN ON DATA AND ANALYTICS EFFORTS

In periods of rationalization, knowing where you stand is more important than ever. Simply put, brands need to have the right tools to be able to prioritize what works and adjust what doesn’t. This can only be achieved through increased investment in data and analytics.

Data and analytics have always been a pain point in China, from fake social media fans to unreliable web analytics solutions and “black box” style media-buying practices that don’t give clients the full view on media costs. This situation might have been tenable in the past but clearly isn’t today – the stakes are too high to compromise on quality.

To ensure a higher degree of quality, brands must invest a higher proportion of their budgets towards forward-thinking data gathering methodologies. From social word of mouth to website testing and keyword performance analysis, clarity is needed now more than ever. Most importantly, these data points must be articulated in a single customer journey view, allowing brands to clearly project consumer flows across touch points. Through sustained data and analytics efforts, brands can free-up budget in the future with no detrimental impact on current performance, and can allocate this money to more long-term digital innovation projects.



ACHIEVE BETTER BALANCE BETWEEN ACQUISITION AND CAPITALIZATION EFFORTS

Over the past few years, digital spending has mostly been concentrated on what can be called acquisition-related efforts. Reach, for example, has been expressed by social media fan numbers, site traffic increase or total e-commerce sales; these numbers are often main metrics for success and the key determinant of many a manager’s end-of-year bonus.

While acquisition efforts certainly have their place in any digital investment plan, now is the time for brands to give more attention to capitalization-related efforts. For instance, instead of chasing new social media fans, brands should place more emphasis on engagement rates or fan base quality. In addition to considering site traffic, they should take a closer look at optimizing journeys to get more people to convert along the way. Instead of looking just at total number of transactions, they should attach more significance to average basket size and purchase frequency. Achieving a more balanced investment portfolio between acquisition and capitalization will help brands get more from their existing assets and achieve healthier digital growth.

STREAMLINE AND UNIFY ALONG A SINGLE DIGITAL VISION

Our experience shows that many brands have complicated, fragmented ecosystems with little continuity or coordination between touch points. It is too often that IT, e-commerce, media, social, ePR and other teams don’t act in sync and pursue their own priorities with no vision of a coherent end-to-end digital customer journey. This silo effect is sometimes made worse by skewed incentives that reward the wrong behavior and encourage short-termism in digital investment. Long-term strategic thinking can’t possibly take place in such an environment and thus brands build for the next quarter, instead of building for the next years.

Unlocking new long-term efficiencies will require organizational change from brands. Top-management starting with the C-suite must lead this change and become seriously invested in taking digital governance to the next level. More long-term KPIs must complement quarterly targets, cross-functional teams must work together in sync and a unique digital vision must be shared across the company to coordinate actions around common goals.

DIFFERENTIATE THROUGH DIGITAL BASED PRODUCT AND SERVICE INNOVATION

Market structures in many industries in China are unsustainable with too many undifferentiated players competing to get a piece of a pie, one that isn’t growing as fast as it used to. Add on top of this Chinese customers’ notoriously low levels of brand loyalty and it becomes clear that brand differentiation is a key success factor. Brands need to stand out through unique experiences that are hard to replicate and for which customers are willing to pay a premium. This is where we see digital innovation as having the biggest potential impact: enabling brands to innovate in their product and service offerings.

Brands must carefully audit their existing experiences, identifying pain points through research and spotting deep-seated unserved customer needs. They must then explore ways to digitally bring upon a meaningful improvement of their product or service by exploring the full scope of emerging technologies, such as connected objects, wearables, big data, and machine learning. A real estate agency, for example, can invest in a virtual reality experience that allows customers to visit apartments from the comfort of their homes. A hotel brand can embark on a full digitization of the user’s stay experience by using wearables and connected devices to track guest data, anticipate their needs, and streamline certain steps such as check-in, payment or room service ordering. All of these are efforts that will pay off in the long-term and will create defendable brand equity.

CONCLUSION: DIGITAL AS A KEY CAPABILITY FOR THE FUTURE

In the end, we believe that the slowdown we are going through will serve as a catalyst for brands’ digital maturation. The market will reward brands that invest in data and analytics, take a long-term view of digital performance, balance their investment portfolio, align the organization, and explore digital applications that truly make a difference for customers. The main issue isn’t one of budget but one of mindset: from digital as an expense and a tactical performance driver to digital as an investment and a key factor for long-term brand performance. Gone are the days where everybody was a winner and brands could just ride the wave. The next few years will see digital innovators breaking away, winning market share and customer loyalty while other brands struggle to keep up.

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